April 2022. A little over a week has passed since the Ukrainian Armed Forces pushed Russian troops away from Kyiv and drove them out of the Kyiv region. But there was no certainty that Russian troops wouldn’t attempt to storm the capital again.
Entry points into Kyiv and beyond were blocked by concrete slabs and sandbags. At most intersections, there were checkpoints with vigilant observers from the territorial defense and army.
However, the city was slowly recovering from the ordeal. Small shops and cafes were the first to come back to life. Kilometer-long traffic jams appeared not on the way out, but on the way into Kyiv. Life, quite literally, was returning to the capital. Unfortunately, not only the good parts were coming back.
On April 11, 2022, the Ministry of Defense concluded a significant contract for the supply of critically needed items at that time: 20,000 ballistic helmets, 20,000 body armor vests, and 40,000 plates for them. The contract amount was 24.5 million euros (26 million dollars) with a 100% advance payment.
It was after this contract that a certain Polish company named Alfa appeared in the contracts of the Ministry of Defense. Its emergence marked not an entry into a grand story of international success, but rather the beginning of a saga involving one of the top 10 largest debtors to the Ministry of Defense. By the beginning of 2023, Alfa had debts to the Ministry of Defense exceeding 3,5 billion hryvnias (95 million dollars) under various contracts.
To understand how this happened, it’s enough to say that the aforementioned Alfa company, despite delays, managed to deliver all the body armor vests and plates. However, out of the 16,000 helmets they imported, 11,000 were immediately returned as unsuitable, and another 5,000 remained in storage, not accepted into the inventory of the Ukrainian Armed Forces.
Despite the delivery failures, on October 25, 2022, the Ministry of Defense once again ordered an additional 20,000 helmets and 50,000 body armor vests from Alfa, totaling nearly 50 million euros. This time, there was no upfront payment.
And this is a good thing because the helmets never arrived in Ukraine, and half of the supplied body armor vests failed ballistic testing.
However, even these two contracts, each of which is larger than the scandalous case with Turkish jackets, seem insignificant compared to the arms supply agreements discussed below.
As revealed by Ukrainska Pravda (media outlet), the Polish company received and withdrew billions of hryvnias from Ukraine. However, it failed to fulfil the deliveries of the paid weapons.
What these contracts are and what fate Ukrainian funds faced will be clarified by Ukrainska Pravda.
“A golden April” for Alfa in the Ministry of Defense
The affection of the Military-Technical Policy Department of the Ministry of Defense for the Polish company has an interesting nature. It resembles a momentary surge of clouded judgment when something is done in an instant that you later deeply regret. Until a new wave comes.
Most of the agreements with state arms suppliers, as discussed in the text about “special marauders”, became public after the Ministry of Defense filed lawsuits in the economic court. The contracts with Alfa are not challenged in Ukrainian courts by the Ministry of Defense because it is a foreign company.
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Such cases should be addressed in international arbitration and submitted through the representation of the International Commercial Arbitration Court at the Chamber of Commerce and Industry. However, their activities are not publicized, unlike the court registry.
Nevertheless, despite this, Ukrainska Pravda is generally aware of at least seven agreements that the Ministry of Defense directly entered into with Alfa. Some of them are already being contested in the mentioned arbitration.
Interestingly, these agreements were signed in batches, during what can be described as “Alfa days” at the Ministry of Defense.
The first such day took place on April 22, 2022. On that occasion, three agreements were swiftly concluded with the company Alfa, totaling around 3.3 billion hryvnias (89 million dollars). For each of these agreements, the Polish company received a 50% advance payment.
The deals pertained to the supply of multiple self-propelled howitzers Gvozdika, 122mm ammunition for the D-30 howitzer, and 122mm rockets for the Grad rocket launcher.
As far as Ukrainska Pravda is aware, only a small amount of the contracted weaponry actually arrived. The ammunition for the D-30 arrived with significant delay, only a tenth of the quantity specified, while for the Grad rockets, it was just a third. As for the Gvozdika howitzers, although they all arrived, their condition did not match the technical specifications stated in the contract. The Ministry of Defense is currently seeking compensation from the supplier.
By the beginning of 2023, Alfa had accumulated nearly 1.7 billion hryvnias (46 million dollars) of debtor arrears to the Ministry of Defense, based on the three April agreements from 2022. With this money, for instance, three Holodomor museums could have been built.
However, the most outrageous aspect of the agreements with Alfa is not even this. Just five days after the direct agreements with the Ministry of Defense were signed by the company, on April 27, 2022, the Ministry of Defense entered into three more interesting contracts.
This time, the supplier was already a state-owned special arms importer called Progress, which was meant to deliver similar types of ammunition as the Polish company.
The total value of the three contracts with the state-owned company exceeded 17 billion hryvnias (460 million dollars). Interestingly, according to Ukrainska Pravda, the Bulgarian ammunition for the D-30, and D-20, and the rocket projectiles for the Grad rocket launchers were supposed to be purchased by Progress through the same Polish company, Alfa.
As far as Ukrainska Pravda knows, the agreements between the Poles and Progress were overseen by the Deputy Director and former Deputy Minister of Defense, Oleksandr Myroniuk. He is known to Ukrainska Pravda readers due to a scandalous search in a criminal case involving the procurement of subpar body armor vests, during which millions of various currencies were found in his couch.
So, within 5 days, the Polish company received various contracts from Ukraine, totaling almost 21 billion hryvnias (568 million dollars).
One might question: what’s the problem if the company will supply both directly and through another company? The answer lies in the price. The same ammunition from the same manufacturers, in direct contracts with Alfa and in contracts with Progress, had differences of tens of percentages.
For instance, the Polish company was supposed to supply 122mm ammunition with a full charge for the D-30/2S1 howitzers at 760 euros (816 dollars), while Progress was to provide the same ammunition for 1195 euros (1283 dollars). That’s a difference of 435 euros (467 dollars), or a 57% increase, for the same projectile contracted essentially through the same company with a gap of just five days.
It’s not surprising that this contract was executed much more efficiently by the Polish subcontractor for Progress than its own supply of the same projectiles, but at a 57% lower cost: the Alfa contract was fulfilled at 10%, while Progress, with delays, managed to complete nearly 80% of the delivery.
Yet, even despite such blatant overpricing specifically in this agreement, the state-owned special arms importer still had accumulated a debt of over 200 million hryvnias (5.4 million dollars) to the Ministry of Defense by the beginning of 2023.
June for a billion: Alfa’s second day in the Ministry of Defense
By the end of May 2022, the Polish company Alfa was supposed to complete the delivery of projectiles according to the April contracts. However, as readers might have guessed, it didn’t even come close to that target.
So, with much difficulty, the supplier managed to negotiate an extension of the delivery deadlines until July 2022.
But on June 13 of that same year, something absolutely incomprehensible happened. Despite knowing that the company had breached previous contracts, the Ministry of Defense decided to provide Alfa with several more billion hryvnias of military funds.
On that day, three more contracts were signed, totaling around 2.6 billion hryvnias (70 million dollars). Again, the company received half of this amount as an advance payment.
All three agreements were likely signed on behalf of the Ministry of Defense by the head of the Military-Technical Policy Department, Shostak, who was removed from his position a week later in June 2022.
This time, the contracts involved the delivery of:
- 120mm mortars (over 11 million euros in advance or 11, 8 million dollars).
- 152mm projectiles for the Giatsint howitzer (18 million euros in advance or 19,3 million dollars).
- 152mm projectiles for the Dana self-propelled howitzer (13 million euros in advance or 13, 9 million dollars).
Do we even need to mention that all three contracts were breached?
For the Giatsint projectiles, only about 40% were delivered; less than 1% of the contracted quantity of 120mm mortars was supplied; and no projectiles for the Dana were delivered at all.
Now, the Ministry of Defense is trying to reclaim the 27 million euros (29 million dollars) in advance payments and seek nearly 13 million euros (13, 9 million dollars) in penalties for the failed deliveries.
But even if this effort succeeds, the disturbing fact remains: the Ukrainian army went a year without receiving critically important weaponry and couldn’t contract it elsewhere because the supplier had taken the money out of the country.
And is the Polish company Alfa capable of refunding the received advances?
Where Alfa begins
For a company with multimillion turnovers, Alfa remains surprisingly inconspicuous. However, in the fall of 2022, the company relocated to the center of Warsaw, although to a rather unremarkable office center.
If you’re expecting to see golden letters above the entrance to the company’s office, you’ll be disappointed. Everything is limited to a modest sign and a prohibition of entry. The company’s website fits on a single page, with the only interesting element being a note of gratitude from the head of the State Border Guard Service of Ukraine, Serhii Deineko.
As gleaned from extracts from Polish registries, Alfa was established as a limited liability company back in 2005. Since then, this company hasn’t exactly risen to prominence.
The sole notable mention of this firm dates back to 2015, when its director, Piotr Sapiezynski, shared in an interview with the influential Polish publication Polityka how his company won tenders for the decommissioning of decommissioned naval vessels of the Polish Navy. Overall, the company engages in trading various types of products, including military ones. In 2020, the company reported a profit of 1.23 million Polish zlotys (294,000 dollars), and in 2021, Alfa earned 7.4 million Polish zlotys (approximately 1.8 million dollars).
Interestingly, financial reports for 2022, the year when Sapiezynski’s company signed contracts worth hundreds of millions in Ukraine, have yet to be submitted by Alfa. Conversely, during the first half of 2023, the firm changed its registration data four times, which might be a way to delay the submission of its reports.
But how did an inconspicuous company from Poland become one of the largest suppliers and debtors to the Ministry of Defense during times of war?
Who in Ukraine could have lobbied for Alfa and secured new contracts for it despite all the evident concerns?
How did this unassuming company gain access to the closed world of Bulgarian defense?
Ukrainska Pravda will continue seeking answers to all these questions and will attempt to connect the dots in its upcoming publications.
Originally posted by Roman Romaniuk on Ukrainska Pravda, translated and edited by the UaPosition – Ukrainian news and analytics website
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